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SERA Plus Changes

SERA is committed to providing exceptional value to its members by delivering quality financial products and services to our members through our SERA Plus program. Consistent with our philosophy, we are pleased to announce that financial planning, investment, insurance (including auto, home and liability), tax planning, estate planning advice, and banking services will soon be offered exclusively through our new relationship with Hantz Group, Inc., and its affiliates (together, “Hantz”), headquartered at 26200 American Drive, Southfield, Michigan 48034.

Our decision to offer financial planning, investment, insurance, tax planning, estate planning advice, and banking services through Hantz allows us to provide you with a variety of financial services under one roof. Hantz Group, along with its affiliates, Hantz Tax & Business, LLC, Hantz Agency LLC and Hantz Bank, to name a few, provides a comprehensive approach to your specific financial service and banking needs. Hantz will offer and provide its services through its 21 locations conveniently located near most of our chapters throughout Michigan.

SERA Council Chair Bob Kopasz with Lisa McClain, Senior Vice President of Hantz Group, Inc., and Tim Easterwood, area President of Voluntary Benefits Solutions at the February SERA Council meeting.

For more information on Hantz, including locations, please visit www.hantzgroup.com or contact our SERA Plus program administrator, Cheryl Streberger at 517-515-9815.

Class Action Against State of Michigan: Taxation of State Pensions (Okrie vs State of Michigan)

Latest Update – July 24, 2015

With the briefing done, the next step in this class-action lawsuit is the oral argument before a randomly selected panel of three judges of the Michigan Court of Appeals. Oral argument, however, could be months from now. Thus, in the coming months, I will take advantage of the lull in the proceedings to switch from mere reportage to critical commentary of the respective positions set forth in the briefs.

For starters, what is surprising in the present litigation has been the Attorney General’s steadfast repudiation or disavowal of the State’s position taken in the Davis litigation before the Michigan Court of Appeals, Michigan Supreme Court and the U.S. Supreme Court. In a nutshell, the position that the State argued and supported in the Davis litigation, relying upon an unanimous opinion of the Michigan Supreme Court in Kosa v State Treasurer, 408 Mich 356, 372 n 22, 372-373 (1980), was that tax-exempt pensions of retired state and public school employees represented deferred compensation that was earned for their years of governmental service, that it was an “integral part of the retirement benefits conferred upon state employees,” and that it was provided to attract and retain qualified employees to work for the State and its subdivisions at below market rates. In my view, the State is judicially estopped from asserting a position in the present litigation that repudiates its previous assertions made before the Michigan courts and the U.S. Supreme Court in the Davis case. For the sake of consistency and integrity, the State should be bound to its previous views expressed in a similar case, resting upon binding Michigan Supreme Court precedent, that tax-exempt pensions represent deferred compensation. Like any private attorney or litigant, the Attorney General should not be allowed to play fast and loose with the courts. Further, throughout this case, the State has simply refused to address our claim that tax-exempt pensions represent deferred compensation.  Simply ignoring it is not an answer.

But what is just as bad is the Attorney General’s refusal to address in the present litigation the Attorney General’s formal opinion issued on December 18, 1991 (in the aftermath of the U.S. Supreme Court’s decision in Davis ), which concluded that “the Legislature, may, without violating Const 1963 art 9 § 24, limit or repeal the tax exemptions now found in the four retirement statutes as to current retirees and members if it provides alternative benefits in their place that are equal to or greater than the pension benefit[s] that would be limited or withdrawn . . . .” (1991 OAG No. 6697, p 6).

Throughout this case, I have effectively adopted the substance of the Attorney General’s 1991 formal opinion, arguing that tax-exemptions for public pensions may be eliminated for retired state and public school employees born after 1945, so long as the State provides comparable financial benefits, equal to or greater than those represented by tax-exempt pensions. Here, the argument in a nutshell is that Mr. Okrie and retired state and public school employees born after 1945 (“Okrieet al.”) earned deferred compensation for their years of governmental service and that it is payable in the form of a tax-exempt pension or a financial value equal to or greater than the value of the tax-exemption. However, yet again, the State refuses to engage with this argument, simply repeating over and over again the mantra that tax-exemptions for public pensions of retired state and public school employees may be eliminated but without ever addressing the rest of the position, the second prong of the disjunctive. In my view, the Attorney General in the present litigation cannot run away from the 1991 OAG No. 6697, but that he is bound to address it, if not defend it.

Keep in mind that the Attorney General, an elected state executive officer, is the chief legal officer of the State of Michigan. 1963 Mich Const art V, §§ 3, 21. Although the constitution does not specify the duties of the Attorney General, MCL 14.32 states in pertinent part:.

It shall be the duty of the attorney general, when required, to give his opinion upon all questions of law submitted by him by the legislature, or by either branch thereof, or by the governor, auditor general, treasurer or any other state officer . . . .

Accordingly, the Michigan Supreme Court has recognized that “among the primary missions of a state attorney general is the duty to give legal advice, including advice concerning the constitutionality of state statutes, to members of the legislature, and departments and agencies of state government.” East Grand Rapids School Dist v Kent County Tax Allocation Bd, 415 Mich 381, 394 (1982). “The Attorney General’s statutory duty to give opinions on questions of law requires him to advise members of the Legislature as to the constitutionality of state statutes and administrative rules when so requested.” Michigan Beer & Wine Wholesalers Ass’n v Attorney General, 142 Mich App 294, 301 (1985), citing East Grand Rapids School Dist, supra, p 394.

Further, as general counsel to the state’s departments and agencies, the Attorney General has the statutory power to issue formal opinions that bind the officials of executive agencies and departments, such as those in the Office of Retirement Services lodged within the Department of Treasury. Traverse City School Dist. v Attorney General, 384 Mich 390, 410 n 2 (1971); Queen Airmotive, Inc v Dep’t of Treasury, 105 Mich App 231, 236 (1981) However, such opinions do not have the force of law, and are therefore not binding on courts. Traverse City School Dist., supra. p 410 n 2; East Grand Rapids School Dist, supra, p 394; Frey v Dep’t of Management & Budget, 429 Mich 315, 338 (1987). Consequently, formal opinions issued by the Attorney General have been held to be binding on state agencies and officers only until the courts make a pronouncement on the issue. Traverse City School Dist., supra; People v Waterman, 137 Mich App 429 (1984);Kalamazoo Police Supervisor’s Ass’n v City of Kalamazoo, 130 Mich App 513 (1983); People v Penn, 102 Mich App 731 (1982). But even though attorney General opinions are not precedentially binding on the courts, they can be regarded as “persuasive authority” by the judiciary. Indenbaum v Michigan Bd of Medicine (After Remand), 213 Mich App 263, 274 (1995); Ludington & N R Co v Epworth Assembly, 188 Mich App 25, 40 (1991). Formal opinions issued by the Attorney General are published, and those issued since January 1, 1997 are available on the Attorney General’s website: www.ag.state.mi.us.

The focus here is the formal opinion issued by the Attorney General in 1991 in response to the question posed by Senator John J. H. Schwarz, M.D., whether the State could eliminate the tax-exemptions for public pensions of retired state employees who had vested in one of the four state pension systems. Since then, the relevant conclusion of the Attorney General’s formal opinion has never been challenged or questioned in a court action, except perhaps this case (leaving aside In re Request for Advisory Opinion regarding Constitutionality of 2011 PA 38, 490 Mich App 295 (2011), which did not address the precise issues and arguments  raised in this case on behalf of retired state and public school employees born after 1945.

Thus, since 1991, the Attorney General’s opinion has been binding on all state departments, agencies and their officers, including the Department of Treasury and the Office of Retirement Services (“ORS”), particularly since the ORS repeatedly assured state and public school employees for decades that upon retirement their pensions were exempt from state and local taxation.

What is significant is that these repeated assertions, promises or assurances by the ORS were legally fortified by the Attorney General’s formal opinion that the Legislature could eliminate tax exemptions for public pensions of retired state and public school employees, so long as comparable financial benefits were provided, which were equal to or greater than the value of a tax-exempt pension. Thus, it would seem to me that Mr. Okrie and all other similarly situated retired state and public school employees born after 1945 are justifiably entitled to rely upon the Attorney General’s formal opinion assuring them the deferred compensation that they earned for their years of governmental service was something: either payable as a tax-exempt pension or a comparable financial value. It could not simply be taken away, as it was through 2011 PA 38.

An important consequence also follows from this.  Because the Attorney General’s formal opinion 1991 OAG No. 6697 is binding on all the state departments, agencies and officers until a court pronounces differently, the Attorney General himself is bound as well to the views expressed by the formal opinion, at least until the courts rule otherwise.

As already indicated, the Attorney General is a single executive heading one of the principal departments in the executive branch. 1963 Const, art V, § 2, 3. Thus, the Attorney General’s formal opinions apply to the Attorney General, too. Here, the Attorney General cannot have it both ways. Having made an official pronouncement as the chief legal officer of the State binding upon all executive state agencies and departments that the Legislature may eliminate tax exemptions for the public pensions of retired state and public school employees, so long as it provides comparable financial benefits to them, the Attorney General is bound by this view in the present litigation. In short, the Attorney General necessarily should be on our side here, not against us.

In any event, I would thank everyone for their support of this cause and your financial help in sustaining  the effort on appeal in the Michigan appellate courts, and if necessary, the U.S. Supreme Court.  As you know, financial support is necessary to enable me to spend the time in a public campaign to counter the State’s “false narrative” that distorts our actual claims and arguments and to make the public in Michigan and elsewhere aware that, at the bottom line, this case represents an income transfer of more than $1 billion (and counting) from retired middle income people to corporations and businesses. As always, donations in any amount are greatly appreciated and needed, especially given the magnitude of this case and forces arrayed against us. My thanks in advance.

The Law Office of Gary P. Supanich

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About Michigan SERA

SERA is an non-profit organization devoted exclusively to issues and concerns of all current and future retirees of the State of Michigan.

SERA works to:

  • keep Michigan state employee pension and insurance benefits secure.
  • assure pension and insurance benefits are improved and keep up with inflation.
  • monitor and take action on important developments affecting state pension and retiree health care benefits.
  • inform its members about proposed federal and state legislation that will affect State of Michigan retirement systems and retiree health care.
  • stay in touch with old friends and make new friends with a common background.
  • monitor the State Employees Retirement Systems Board, the Investment Advisory Committee (which makes recommendations to the State Treasurer on investments in the State Employees Retirement System pension fund), and the 401K and 457 programs provided through Voya.
  • work with the Office of Retirement Services and Civil Service Benefits Division to help retirees and near retirees with their pension and benefits issues.
  • provide SERA PLUS, great discounts and services in many areas of retirement living such as first-year free tax preparation, estate planning, tax planning, home and auto insurance, financial services, mortgage services, estate transfer strategies, final settlement planning, and much more through SERA’s association with Hantz Group, Inc..

SERA works through its members, leaders, and committees to promote the best interests of state employee retirees and future retirees. At least eight times since 1974, SERA was a moving force in pension increases or benefit improvements. In 2011, we opposed the pension tax and helped eliminate it for 70% of retirees; we opposed the remaining tax on public pensions for those born after 1945 in the Michigan Supreme Court. We opposed the recent state employee retirement system changes. That work continues.

SERA has 21 local chapters statewide that are linked through the Coordinating Council of the State Employee Retirees Associations of Michigan (the SERA Coordinating Council). SERA chapters have periodic meetings with guest speakers, opportunities for networking, newsletters, and other activities.

SERA welcomes the new ideas and energy of new members! To join, contact Cheryl Streberger at 517-515-9815 or cstreberger@yahoo.com.